Economics Unit I

scarcity

created by unlimited wants and needs and limited resources

factors of production

land-natural labor-human capital goods entrepreneurship

entrepreneurship

risk taker, a person who improves a business or process

opportunity cost

best alternative not chosen, the actual cost of any decision

trade off

giving up some of one thing to get more of another, sacrifice

incentives

gives motivation for a choice moral, personal, coercive, financial

market system

economic system based on free interaction of producers and consumers, private property and competition, individual choice

command system

economic system based on government ownership of the factors of production to provide for the people

traditional system

economic system based on practices of the past, religion and/or customs

mixed economic system

economic system with some characteristics of market and command systems; all economies are like this to some degree, some private ownership and some government ownership and control

Adam Smith

wrote "The Wealth of Nations" and described the benefits and characteristics of a market system

Karl Marx

wrote "Communist Manifesto" explaining the proletariat would take over the bourgeoisie and work for the benefit of all (common ownership of wealth)

economic policy goals

economic freedom economic growth efficiency security equity stability

socialism

political system advocating state ownership of industry, but with some private ownership; usually with a mixed economic system

communism

A political system in which the government owns all property and dominates all aspects of life in a country.

anarchy

absence of government, lack of political leadership

autocracy

rule by one, dictator or fascist

gross income

pre-tax income

net income

income after taxes have been paid

disposable income

income available to spend after taxes have been paid

discretionary income

income left after taxes and all necessary bills have been paid

consumerism

groups of people educated about products and services purchased and demand better and safer products

utility

usefulness of a good or service satisfaction you get from a good or service